Covid pandemic exposes the infrastructure gap
Zimbabwe’s infrastructure challenge has worsened over the years and the Covid-19 pandemic has highlighted the long-existing infrastructure gap between the haves and have-nots, particularly, regarding access to basic services such as clean water, sanitation and healthcare. According to the Africa Development Bank’s Economic Brief the Covid-19 pandemic has revealed the intensity of the infrastructure challenge in Africa which should be urgently attended to.
In the past two decades, there has been an upward trajectory in the share of population with access to these basic services in sub-Saharan Africa (SSA ), but the population grew at an even faster rate. Zimbabwe faces a number of important infrastructure challenges and the most pressing challenges lie in the power and water sectors. Inefficient and unreliable power supply and the deteriorating quality of the roads pose major risks to the economy, while the maintenance and upgrading of existing power infrastructure no longer looks to be affordable. At the same time, overhauling the water and sewerage system is imperative for curbing the public health crisis.
From a regional point of view, the AfDB estimates that sub-Saharan Africa (SSA ) infrastructure financing deficit for water and sanitation is between US$43-53 billion annually. This lack of access to physical infrastructure for basic services constrains Africa’s ability to fully realise its development potential.
When Covid-19 became a pandemic, two key public health measures were recommended to curb its spread: i) social distancing, and ii) frequent washing of hands with soap and water. However, these measures were difficult to implement in a sustained way in Africa because of the largely informal housing and work sector, and lack of adequate access to basic services.
“As of 2018, only 25% of the total population in SSA had access to basic hand washing facilities including water and soap. If access to clean water and sanitation is critical to curbing the spread of Covid-19, especially within fragile healthcare systems or where social distancing is harder to implement, investment in these facilities in Africa is highly necessary for resilience against the present pandemic and future epidemics. Lastly, the basic services infrastructure deficit is compounded by weak healthcare systems as compared to the rest of the world. Africa has a significantly lower ratio of hospital beds, ICUs and health professionals per capita. The region has an average of 1,8 non-ICU hospital beds per 1 000 people relative to 5,8 in France or 3,4 in Italy. The available estimates dating back to 2016 shows that 51% of the healthcare facilities in SSA have basic access to water services while 23% have limited access and 26% no access. This is much lower than the world’s estimates at 74% . It is estimated that 22 of the 25 countries most vulnerable to infectious diseases are in Africa and nearly all African countries critically depend on imports of medicines and pharmaceutical products where up to 94% of total stocks are imported”, said the AfDB.
According to the report, access to high quality basic services infrastructure must be prioritised as part of post-Covid-19 stimulus plan. “However, infrastructure investments are capital intensive and require huge sunk costs and long-term financing. Unlike advanced countries, many African countries are fiscally constrained and access to finance is highly limited. Their debts are rising due to binding budget constraints. More recently, the Covid-19 pandemic is worsening their revenues as a result of economic slowdown. These developments expose the continent to scarce and expensive funding from international markets. Africa’s economic growth, which remained stable in 2019 at 3,4% and was on course to record 3,9% in 2020 before Covid-19, is now projected to contract sharply to an estimated growth rate of -1,7% in 2020, leading to a recession and the lowest growth rate in half a century. If the pandemic continues beyond the first half of 2020, the recession could be worse with a real GDP growth rate contracting further to over -3% , resulting in cumulative GDP losses ranging from US$173,1 billion and US$236,7 billion for 2020 and 2021 respectively”, stated the report.
The report proposed a number of recommendations that the Zimbabwean government should take into consideration when looking at how they can fund the infrastructure gap.
• Publicly sponsored infrastructure funds: According to the report the funds may include sovereign wealth funds. To prepare for future pandemics like Covid-19, African states should set up entities that invest in infrastructure projects based on private eligibility criteria and collaborate with private sector investors to finance the needed infrastructure on the continent. Such funds can come from countries’ foreign reserves and other sources such as exports of commodities like oil and minerals.
• Public-Private Partnerships (PPPs): Given the low access to water and sanitation on the continent and the high risks and low returns associated with investments in the water and sanitation sector, the bank advised governments to use the availability-based PPP or performancebased contracts (PBC) to provide services ranging from the provision of bulk water, leakage management to increasing connectivity to reduce its citizens’ exposure to future pandemics like Covid-19. This approach has proved to be useful in increasing efficiency and expanding access in other developing countries in Asia. According to the report, this type of PPP focuses on results, with payments conditional on the private sector partner achieving predefined performance standards. In this case the private sector partner does not take-over the management of the utility as that remains the primary responsibility of the public sector partner while benefiting from private sector expertise in key areas.
• Refocus government resources: To increase availability and access to basic services, governments need to reallocate public resources from projects like ICT and energy that attract more private sector investors towards low-return infrastructure projects like water and sanitation that attract less interest from the private sector. This is to prevent crowding out private-sector financing and redirect governments’ resources towards low returns infrastructure projects which are unlikely to attract private investments. Such reallocation may include providing free land to a private investor or transferring an existing asset to be managed and operated through PPPs.
• Develop long-term infrastructure plans: According to the report long-term infrastructure planning is not yet in place in many African countries while this is a predominant tool to correct the perception of high-risk premiums for investments in Africa. Governments need to develop comprehensive national planning frameworks (eg National Development Plans (NDP) and Medium-Term Expenditure Frameworks (MTEF)) for programmes and project selection, implementation, and maintenance which will give predictability and credibility in public finance systems and attract more private investments in basic services’ infrastructure on the continent. Each country’s infrastructure framework should be in line with regional and continental infrastructure priorities as reflected in Regional Infrastructure Development Master Plans (RIDMP). The commitment to the national infrastructure plan or framework should be reflected in individual governments’ MTEFs. Therefore, the infrastructure plan should then act as a framework for planning and cooperation with development partners and the private sector.
In conclusion, the bank recognises that poor infrastructure is a critical barrier to accelerating growth and poverty reduction in Africa. Studies have shown that increasing the stock of infrastructure by 1% can add up to 1% to gross domestic product. Infrastructure is considered a key component of the investment climate by reducing the costs of doing business and enabling people to access markets. It is a precondition for private sector development and a key enabler of integration of regional subregional markets for intra-African trade, and positioning of a competitive Africa in world markets. Investments in infrastructure are critical to advances in agriculture and fundamental to human development, including the delivery of health and education services to poor people. Infrastructure is an enormous untapped potential for the creation of productive employment.
Mapungwana is a local independent economist. These weekly New Horizon articles are coordinated by Lovemore Kadenge, an independent consultant, past president of the Zimbabwe Economics Society and past president of the Institute of Chartered Secretaries and Administrators in Zimbabwe. Email: kadenge.zes@gmail.com/ cell: +263 772 382 852.